Mercedes Mullins
In Michigan, gasoline and other fuel products are subject to excise taxes on both the state and federal levels. The state excise tax rate for gasoline in Michigan is 16.4 cents per gallon, while diesel is taxed at 18.1 cents per gallon. These taxes are included in the price of fuel paid by end consumers and are used to support the Federal Highway Administration. In addition, a 0.1 cents per gallon charge for the Leaking Underground Storage Tank Trust Fund (LUST) is included in the tax rates for gasoline, diesel/kerosene, and compressed natural gas.
| Characteristics | Values |
|---|---|
| Gasoline | 16.4 cents per gallon |
| Diesel | 18.1 cents per gallon |
| Inflation Adjusted Fuel Tax Rate Effective from | January 1, 2022 |
| Next Inflation Adjusted Fuel Tax Rate Effective from | January 1, 2023 |
| Applicable Tax | Sales tax |
| Excise Tax | Yes |
| Excise Tax on Aviation Fuel | $0.03 |
| Excise Tax on LPG | Quarterly tax |
| Excise Tax on Motor Fuel Suppliers | 20th of each month |
| Excise Tax Payment Responsibility | Fuel vendors |
| Federal Excise Tax Rate | 0.1 ¢ per gallon |
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What You'll Learn
Gasoline excise tax is 16.4 cents per gallon
In Michigan, gasoline is subject to a state excise tax of 16.4 cents per gallon. This is in addition to, or sometimes instead of, traditional sales taxes. Excise taxes on fuel are implemented by every state, much like those on alcohol and tobacco products.
The state excise tax on gasoline in Michigan is currently higher than that of many other states. For example, Alaska has the lowest gasoline excise tax rate of $0.0895 per gallon.
In Michigan, the state excise tax on gasoline is included in the price of a gallon of gas. This means that consumers pay the tax when they purchase gasoline, although it is the fuel vendors who are responsible for paying the excise tax to the state. The federal government also collects excise taxes on gasoline, which are used to support the Federal Highway Administration.
The price of a gallon of gasoline in Michigan is made up of several components, including the cost of crude oil, refining, distribution and marketing, as well as taxes. In most areas, state and federal excise taxes amount to about 13% of the cost of a gallon of gas.
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Diesel excise tax is 18.1 cents per gallon
In Michigan, automotive fuel is subject to excise taxes on both the state and federal levels. While gasoline is taxed at 16.4 cents per gallon, diesel excise tax is 18.1 cents per gallon. This is in addition to traditional sales taxes.
Excise taxes on fuel are implemented by every state, much like taxes on alcohol and tobacco products. In Michigan, aviation fuel is subject to a state excise tax of $0.03.
Payments of fuel excise taxes are made by fuel vendors and are included in the retail price of the fuel. Fuel producers and vendors in Michigan are responsible for filing various fuel tax reports to the Michigan government.
The federal excise tax rates on different motor fuel products vary. For instance, the Gasoline, Diesel/Kerosene, and Compressed Natural Gas rates include a 0.1 ¢ per gallon charge for the Leaking Underground Storage Tank Trust Fund (LUST). These tax rates are based on energy content relative to gasoline.
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Suppliers must collect and remit tax
In Michigan, suppliers are responsible for collecting and remitting taxes on automotive fuel. The state imposes an excise tax on gasoline, which is included in the price of the fuel and ultimately passed on to the consumer. This excise tax is paid by fuel vendors, not end consumers, and fuel producers and vendors must file fuel tax reports with the Michigan government.
The Michigan Department of Treasury is responsible for collecting these taxes and publishes the applicable tax rates. The tax rate for gasoline is 16.4 cents per gallon, while diesel fuel is taxed at 18.1 cents per gallon. These rates are subject to change annually on January 1st, with the new rate being published no later than 30 days before it takes effect. The rate is determined by multiplying the previous year's rate by 1 plus the lesser of 0.05 or the inflation rate, and then rounding up to the nearest tenth of a cent.
Additionally, federal motor fuel excise taxes are also collected in Michigan. These taxes are collected from the manufacturer by the IRS and support the Federal Highway Administration. The federal excise tax rates vary depending on the type of fuel, with gasoline, diesel/kerosene, and compressed natural gas having a rate that includes a 0.1 cent per gallon charge for the Leaking Underground Storage Tank Trust Fund (LUST).
It is important to note that the tax must be collected and remitted at the time of removal of the motor fuel, unless otherwise specified in the act. This means that suppliers must ensure they are compliant with the current tax rate and are collecting and remitting the correct amount to the appropriate authorities.
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Taxpayers can seek a refund for non-taxable use
The state of Michigan levies a tax on automotive fuel, with gasoline taxed at 16.4 cents per gallon and diesel at 18.1 cents per gallon. This tax rate is subject to change due to inflation adjustments. While taxpayers generally cannot avoid these taxes, there are specific circumstances under which taxpayers can seek a refund for non-taxable use.
One scenario where a refund is permissible involves the use of undyed diesel fuel in non-highway equipment. In such cases, the customer can apply for a refund from the department for the tax paid on the fuel used in non-highway applications. However, it is essential to note that the tax must be listed separately from the truck transaction on the invoice, and invoices must be properly prepared with specific information, including the seller's name, address, date of sale, purchaser's name, type of fuel, number of gallons, and price per gallon.
Similarly, if a customer purchases undyed diesel fuel or kerosene for non-highway purposes, they are subject to the current motor fuel tax rate per gallon but may apply for a refund for the tax paid. This refund process also applies to reefer units, which are considered separate transactions from fuelling trucks. However, it is important to note that MCL 207.1038, which allowed for tax exemptions on purchases of undyed diesel fuel of 100 gallons or less for non-taxable purposes, was repealed in 2017.
End users operating motor vehicles with common fuel supply tanks can also seek refunds. If diesel fuel is used to propel the vehicle and operate attached equipment, a refund of 15% of the tax paid may be claimed. This refund percentage may vary if the department has determined a different eligible amount for a specific class of motor vehicles with attached equipment.
To initiate the refund process, taxpayers can contact the Special Taxes Division, Motor Fuel Unit, at 517-636-4600 to inquire about eligibility and the required documentation. In some cases, refunds may be filed online or submitted via email to a designated address. It is important to carefully review the requirements and provide complete and accurate information to ensure a successful refund claim.
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Michigan's fuel tax rates are adjusted for inflation
The state's fuel tax rates are subject to annual adjustments, with the new rates taking effect on January 1 of each year. The Department is required to publish notice of the upcoming year's tax rate no later than 30 days before it takes effect. This allows fuel vendors and suppliers to prepare for any changes in taxation.
Michigan's fuel tax rates include both state and federal excise taxes. While the state imposes excise taxes on gasoline, diesel, and aviation fuel, the federal government collects taxes on gasoline, diesel/kerosene, and compressed natural gas. The federal excise tax rates are based on energy content relative to gasoline, and they contribute to the funding of the Federal Highway Administration.
The inflation-adjusted fuel tax rates aim to ensure that the purchasing power of the tax revenue keeps pace with inflation. By adjusting the tax rates annually, Michigan can maintain the real value of its tax revenue over time. This helps to ensure that the state has sufficient funds to support various programs and infrastructure improvements related to transportation and fuel distribution.
Additionally, Michigan offers emergency-related state tax relief to taxpayers located in areas impacted by severe weather. This relief applies to certain fuel-related taxes, providing support to residents facing challenges due to natural disasters or other severe weather events.
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Frequently asked questions
As of 2025, the tax on automotive fuel in Michigan is 16.4 cents per gallon for gasoline and 18.1 cents per gallon for diesel.
Fuel excise taxes in Michigan are paid by fuel vendors and producers, who are also responsible for filing fuel tax reports to the Michigan government.
Fuel vendors in Michigan pay the fuel tax quarterly, on the 20th of April, July, October, and January. Fuel suppliers pay monthly, on the 20th of each month.
Aviation fuel in Michigan is subject to a state excise tax of $0.03 per gallon.
Beginning in 2022, the tax rate on motor fuel in Michigan is determined by multiplying the previous year's rate by 1 plus the lesser of 0.05 or the inflation rate, and rounding up to the nearest 1/10 of a cent.
